US Crude Oil Inventory and Production Boost Crude Oil Prices
Crude oil prices rose
May WTI (West Texas Intermediate) crude oil futures contracts trading in NYMEX rose by 5.2% and closed at $37.75 per barrel on April 6, 2016. Brent crude oil futures trading in ICE also rose by 5.2% to $39.84 per barrel. Prices rallied due to an unexpected draw in US crude oil inventories. ETFs like the United States Oil Fund (USO) and the ProShares Ultra Bloomberg Crude Oil ETF (UCO) moved in the direction of crude oil prices. They rose by 5.2% and 10.7%, respectively, on the same day. The SPDR S&P 500 ETF (SPY) also rose by 1.1% and settled at $206.5 on April 6, 2016.
US crude oil inventory
The EIA (U.S. Energy Information Administration) reported that the US crude oil inventory fell by 4.9 MMbbls (million barrels) for the week ending April 1, 2016—compared to the previous week. The US crude oil inventory fell for the first time in the last eight weeks. To learn more, read the next part of the series.
Supply disruption
WTI crude oil prices also rallied due to a supply outage. The outage was due to a delay in the restart of the Keystone pipeline. It delivers crude oil to Cushing and Illinois. These pipelines provide a supply of 590,000 bpd (barrels per day) of crude oil. As a result, the front month crude oil futures contracts and second month crude oil futures spread were the narrowest in the last three weeks. The uptick in crude oil prices benefits oil producers like SM Energy (SM), Sanchez Energy (SN), Matador Resources (MTDR), Energy XXI (EXXI), and Goodrich Petroleum (GDP).
Kuwait comments
On April 5, 2016, Kuwait’s OPEC (Organization of the Petroleum Exporting Countries) governor reported that an agreement might be reached during the oil producers meeting on April 17, 2016. However, Saudi Arabia and Kuwait decided to resume crude oil production at the jointly operated 300,000 bpd Khafji field. This means that Saudi Arabia and Kuwait have to reduce the crude oil production at other oilfields. Read Do Current Crude Production Levels Bode Well for Doha Meeting? and Crude Oil Prices: How They Direct Crude Oil Producers’ Actions to learn more.
Crude oil price volatility
WTI and Brent crude oil prices have rallied almost 45% in the last two months. Read How Long Can Bullish Catalysts Benefit Crude Oil Prices in 2016? and How Are Brazil and India Affecting the Crude Oil Market? to learn more. However, US crude oil prices lost 9% since the 2016 high on March 22, 2016. Read Key Bearish Factors for Crude Oil Prices to learn more.
The roller coaster ride in crude oil and gas prices impacts ETFs like the ProShares Ultra Oil & Gas (DIG), the SPDR S&P Oil & Gas Equipment & Services ETF (XES), the DB Crude Oil Double Short ETN (DTO), the Direxion Daily Energy Bear 3x (ERY), and the VelocityShares 3x Inverse Crude Oil ETN (DWTI).